Corruption in China

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11.08.200
11.08.200
11.08.200
Universidad Mayor Santiago de Chile
Facultad Ciencias Económicas y Empresariales
International Marketing
Manfred Bräuchle Q.
Case 2- 5 Coping with Corruption in Trading with China
Rafael Fuentes Candia (Chile)
Michael David Franz-Josef Kampmeyer (Germany)
Johannes Knapp (Germany)
Case 2 – 5 Coping with Corruption in Trading with Chin
Tuesday, August 12, 2008
page 2
Rafael Fuentes Candia
Michael Franz Josef Kampmeyer
Johannes Knapp
I. List all different types of bribes, payments, or favors represented in this case and say why each is either legal or illegal
Payments are made and favors are given to establish goodwill or guanxi. Guanxi is an important part of the Chinese culture. In the present case “Coping with Corruption in Trading with China”, we identified a great variety of legal and illegal types of payments.

· Business trips. Generally there exist two different types of business trips. In the first case, the foreign company invites an official to get to know the company better and visit a factory in the home country of the company. (Legal) Often the costs of the trip are added to the overall costs of the contract. In the second case, an official is simply offered a junket. No inspection of the company is taking place.(Illegal)

· Outright payments to improve business are illegal. However these payments are frequently being made to speedup the process of setting up a shop or expanding into their country. These payments, or bribes, from the international companies are to ensure that they are easily welcomed into the country and are afforded protection from competition.

· The engage in black-markets trade of import an export licenses (Illegal). Many products are subject to import licenses, including some wool, grains, oilseeds and oilseed products, cotton, iron and steel products, commercial aircraft, passenger vehicles, fertilizer, hauling trucks, and rubber products. · The bribes to officials to push goods through or the commodity inspection bureau is another type of payment (Illegal). The scope of inspection undertaken by local commodity-inspection authorities entails product quality, technical specifications, quantity, weight, packaging, and safety requirements Case 2 – 5 Coping with Corruption in Trading with Chin

Tuesday, August 12, 2008
page 3
Rafael Fuentes Candia
Michael Franz Josef Kampmeyer
Johannes Knapp
and with a bribery the companies obtain a quality certification to arrival for the goods.
· Gift-giving is very common and is a widely accepted practice; small gifts include such items as pens, bottles of wine, dinners, and other types of relatively little value(legal). An illegal gift is a gift which is out of proportion like a vacation or a car.

II. For those practices that you say are illegal, classify each as lubrication, extortion, or subornation, and tell why.
Subornation
Engagements in black market trade are subornation. Import licenses for example can only be obtained by paying a large sum to an official. The legal obtainment of licenses might be impossible or take much longer.

Offering junkets is also subornation as the sum involved organizing it is out of proportion and the official is enticed to prefer the offer of the company paying for the trip.
Extortion
Payment is demanded by an official to hand over a document. There is no alternative to paying other than stopping doing business.
Lubrication
Lubrication is offering a small amount of money to get a job done quickly. In the present case we couldn’t identify any lubrication.
Case 2 – 5 Coping with Corruption in Trading with Chin
Tuesday, August 12, 2008
page 4
Rafael Fuentes Candia
Michael Franz Josef Kampmeyer
Johannes Knapp
III. Which of the payments, favors, or bribes are illegal under the Foreign Corrupt Practices Act (FCPA)
First of all, before we determine whether the above mentioned items are illegal under the FCAP we would like to point out the main issues of the act....
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